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Tax credit is available for self-employed caregivers

Women have been particularly hard hit by the COVID pandemic.

While the modern Dad may be more involved with the family, women remain the primary caregivers for a range of family members.

An act called The Families First Coronavirus Response Act (“FFCRA”), provides smaller employers refundable tax credits to reimburse the cost of providing paid sick and family leave to their employees for COVID-related leave.

The tax credits are designed to cover the costs of employee leave related to the employee’s own COVID-related health needs or those of family members.

One thing that has slowed the recovery in the labor market has been the availability of child care. When day care providers are either out of business or limited in operation due to COVID, the effects ripple through the labor market.

FFCRA’s tax credit for employers may not be well known to many of the readers of this column. However, many of you may be self-employed. How do you get relief when family care needs limit your ability to do your tasks?

FFCRA actually thought of you. If you are self-employed, your income is reported on schedule C of your personal tax return. You may have no employees. But there is still a leave-based credit available to you.

When you file your 2020 tax return, or amend that return if this column is a surprise to you, IRS Form 7202 may provide you with a payment of as much as $10,000.

The credit is available if you missed some days of self-employment because you required COVID-related care or because you had to provide such care to someone else.

The credit is based on your self-employment earnings using an assumed 260-day work year. Take your schedule C net earnings and divide by 260. This is your daily “pay rate.” This is then multiplied by 67% to get your allowed lost daily pay.

You can be reimbursed for as many as 50 days of lost pay due to care obligations. There is a separate limit of $200 per day allowed reimbursement.

Therefore, if you lost 50 days of work between April 1 and Dec. 31 (the covered period) you can be reimbursed $10,000 (50 days times maximum $200 per day).

The maximum credit is less if 67% of your daily pay rate is less than $200. But my objective here is to let you know there may be funds to help you that you did not know about.

You can qualify if you were subject to a quarantine or isolation order, advised to self-quarantine, or experienced COVID symptoms that required care. If you had to care for someone else satisfying these requirements, you also qualify.

You can also qualify for days missed because you had to provide COVID-related care to your son or daughter, even if they did not have COVID symptoms. The inability to find day care for a healthy child qualifies you for a family leave credit.

Generally a child must be under age 18, unless he or she is incapable of self-care due to a mental or physical disability.

A child includes a biological, adopted, foster or stepchild. It also includes any legal ward. The key requirement is that you are responsible for the care of that child, and you missed days of self-employment to provide care that was otherwise unavailable due to COVID.

The credit may also be available if you provide care “standing in loco parentis.” In a city called Albuquerque we tend to think of loco as meaning crazy. In Latin it means “instead of.” So in loco parentis means in the place of a parent.

Standing in the place of a parent means assuming the day-to-day responsibility to care for the child. This may be the role of a grandparent. It is not clear how broadly it can be applied.

The child may have a mother and a father present in the home. There may be no legal obligation of care. It is based on the facts of each case.

But, again, the point of this column is to make you self-employed readers aware that IRS Form 7202 may be a way to recover the earnings from work days lost due to COVID-related caregiving.

James R. Hamill is the Director of Tax Practice at Reynolds, Hix & Co. in Albuquerque. He can be reached at